Cloud 03.03. To Do It Yourself or Not?

Cloud solutions must provide customers with secure access to their data.

A growing percentage of on-premise spending will be replaced by cloud computing.

Companies will spend approximately U.S.$200 million on the public cloud in 2016.

To operate one’s own data center, or run applications on external servers? Better yet, why not simply lease applications? The increasing diversity of cloud services on offer inevitably ends up overwhelming customers. However, one thing is clear. In most branches of business, data center operations do not fall under a given company’s core area of expertise.

The role of data centers today resembles the way power plants were used at the start of the industrialized age. In the early 19th century, almost all large industrial companies operated their own power plants because there was no uniform standard pertaining to the power supply, nor was there a reliable power grid.

Once both were available, companies were happy to forego generating their own power. The newly created utility companies delivered the required electricity reliably and, because of the economies of scale, more cost-effectively than when it was generated by their own power station. Electricity became a commodity.

Cloud computing service providers can present a similar argument today. Operating hardware and software is not a core area of expertise for many companies. In contrast, a specialized provider can offer IT services, ranging from computing power and storage space all the way to complete applications, better and for less money than their potential customers can. And that’s not even taking into consideration the expertise needed to run a data center in a high-quality, secure manner that many companies would be hard pressed to achieve.

Nowadays, companies can choose from an entire portfolio of cloud-based IT services. They include: infrastructure as a service (IaaS), where (additional) hardware, computing power and storage space in the cloud are leased on a temporary or long-term basis; platform as a service (PaaS), where users can access a cloud platform equipped with a programming environment and tools to develop and operate their own applications; and software as a service (SaaS), where complete applications, including administration, operations, upgrades, and maintenance are provided from the cloud.

Good Reasons for Cloud-Computing

The most important reasons for customers to consider cloud-based computing:

Fast implementation time, providing quick access to functionality

Reduced IT efforts because both hardware and software operation and maintenance are the provider’s responsibility

Flexibility due to subscription rather than licensing contracts and “pay-what-you-use” concepts

Scalability to support changing business needs and supporting growth

Even though cloud services have established themselves on the IT market over the last few years, commonly agreed definitions of “what is cloud” are hard to find.

Comparison of OnPremise, Hosting, and Cloud

On-premise systems are primarily the customer's responsibility.

SAP partners generally provide hosting services.

Cloud services are provided by SAP.

The line gets especially blurry at times between application hosting (which has been part of the portfolio of many IT service providers in the last 20 years, especially in the realm of SAP systems) and SaaS (which refers to operating applications in the cloud).

Lately, hosting has continued to evolve with the primary objective of offering “off the rack” software — such as application hosting — in addition to the more conventional outsourcing of hardware. From the customer’s perspective, this comes very close to being a cloud service. To some extent, subscription models are even used for billing purposes, so that the software license is actually held by the hosting provider.

From a customer’s point of view the definition might also be of little relevancy. As long as the quality is great, the service level convincing and the price right the customer need not worry what the provider is doing behind the scenes.

SAP’s Cloud-Strategy in a Nutshell

SAP’s strategy announced in 2013 is to offer three flavors of cloud services:

Public Cloud-applications, e.g., to support human resources, customer and sales management, finance or procurement – as well as ERP in the cloud

Summary

Cloud 03.03.

To Do It Yourself or Not?

Many customers ask themselves if it is better to run their IT applications in-house, or to consume them as a service from the cloud.

The core expertise of most companies is usually not the operation of hardware and software. A specialized provider can offer IT services better and for less money.

The most important reasons for customers to consider cloud-based computing:

Fast implementation time

Reduced IT effort

Flexibility

Scalability

Nowadays, companies can select from a whole range of cloud-based IT services, including software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service (PaaS).The SAP cloud portfolio includes:

SAP HANA Enterprise Cloud which is offered as a managed cloud.

Line of Business Cloud Solutions focusing on People, Money, Customer and Supplier

Drive yourself

As an analogy to software operated by the customer, think of a personal car.
You drive when and how you like, choose the route, and take breaks whenever you need one. All of your individual desires are taken into consideration, starting from the moment you choose and configure your dream car.
However, you also have to finance the complete cost of the car, even if you don’t use it very often. And you might even have to pay for a garage.
The same is true for software that you operate yourself – maximum flexibility comes at a price, namely higher fixed costs.

Ride with someone else

As an analogy to the use of cloud services, think of a high-speed train.
You don’t have to worry about the route or cost of the train itself. You simply get on and pay for the actual distance that you travel. If the train is canceled for some reason, a replacement is usually made available.
Cloud software works in a similar way – you can get started with an application without much advance notice. But you are also less flexible when it comes to customized options and functionalities.